Chint Group To Invest in Massive Gansu Solar Energy Projects: Sees Upside In China's Renewable Energy Market

Chinese power equipment manufacturer Chint Group recently announced plans to invest 22 billion yuan ($3.25 billion) to build two solar power projects in Gansu province. These new projects will significantly expand the company's portfolio within the renewable energy sector. To support the expansion, Zhejiang-based Chint, recently signed an agreement with the Gansu provincial government to build a solar power plant in Lanzhou, China. The plant, will have a capacity of 1 gigawatt (gW), and will also include a solar module manufacturing venture in the city with an initial manufacturing capacity of 200 megawatt (mW). While this announcement is excellent news for renewable energy proponents, the company unfortunately did not disclose the time-line for the project. With no time-line, questions remain regarding the projects certainty? How soon will the Chint Group begin production? Are the funds needed to support the capital investment available and unallocated? Currently, solar power projects completed or under construction in Gansu exceed 100 mW. This proposed investment by the Chint Group would increase renewable energy production capacity by more than 10 times!

While it seems fair to question the certainty of the project, it is hard to question China's resolve in the renewable energy market. Currently, China plans to develop 13 solar power projects in the western region as part of a government plan to cut emissions and boost energy investment in the area. The Chinese government is also tendering bids to develop similar projects in six provinces, which will have a combined capacity of 280 mW. While many have criticized China's environmental record in the past, China continues to move aggressively within the renewable energy market, and has now become a center for the global solar power industry. This growth, has opened up opportunities for many foreign companies, who recognize the potential that the renewable energy market holds. For example, late last year, Arizona-based First Solar Inc agreed to build a solar power plant in Inner Mongolia together with the local government.

While optimism abounds, many analysts continue to remain worried about the potential scope of Chint's investment into solar energy. Recently, Shi Pengfei,the deputy president of Chinese Wind Energy Association, argued that the cost of solar energy production is significantly higher than wind energy, a renewable energy source that should be carefully considered. As Mr. Pengfei pointed out, "compared with cost of 0.3 yuan per kilowatt-hours (kWh) of coal-fired power, the cost of electricity produced by solar power could be as much as 1 yuan per 1 kWh. The government must pay 0.7 yuan to make up for the price gap." Underlying his suggestion is the question of whether this significant investment in solar is really worth exploring? Should renewable energy industries follow the rule of " the more, the better", despite note being comparable price wise to current energy generation means?

Despite these objectives, China continues to explore novel ideas to support the expansion of solar energy. One innovative tool is the expansion of solar tariffs in all provinces. Many Chinese government officials have consistently argued that, with carefully planning and technology advancement,  China may be able to make solar power as cheap as electricity produced from coal within the next decade. This transition would accelerate as cleaner energy sources are developed which cut emissions. To aid in this transition, the Chinese government has proposed cutting the country's solar-power tariffs to between 0.6 yuan (9 cents) and 0.8 yuan a kilowatt-hour by 2020. The government expects that its capacity to generate electricity from sunlight may increase to about 20 gigawatts over the next decade, likely more depending upon investment and efficiency. In fact, China has allocated about 5 trillion yuan to the development of clean energy sources; an investment, that will enable solar projects to quickly realized "grid parity" with fossil fuels.

Photo Credit: Yael Borofsky, Lubos Motl Pilsen